Oregon Shouldn't Punish Clean Vehicles

Oregon, a long-time pioneer in transportation policy, may take a step backward by imposing a discriminatory fee only on efficient vehicles in the name of stabilizing transportation funding.

Relative to the gas tax— which inherently encourages vehicle efficiency because more efficient vehicles use less gas—House Bill 2342 proposes a system that penalizes efficiency imposing a new, per-mile fee on vehicles that get more than 30 miles per gallon and electric vehicles (working at cross-purposes with the state’s tax credit that encourages consumers to buy electric vehicles). It’s Environmental Economics 101 flipped on its head, and it won’t solve the state’s long-term transportation funding challenges because it fails to address the largest source of funding losses: inflation.

It Pays to Pollute

How House Bill 2342 Works

House Bill 2342 would impose a flat per-mile “Road User Charge” on all vehicles that get more than 30 miles-per-gallon and electric vehicles.

A flat Road User Charge that singles out the cleanest vehicles on the road is not a long-term solution to Oregon’s transportation revenue challenges. It fails to address the largest source of transportation revenue losses: inflation. It puts the collection of needed revenue at odds with the state’s efforts to reduce vehicle-miles-traveled. And if extended to all vehicles in its current form, it would result in gas guzzlers paying less than they are now, resulting in revenue losses.

A Better Solution

Oregon lawmakers should reject House Bill 2342 and instead adopt a simpler, better solution that addresses the all the real sources of transportation funding losses without undermining progress toward climate, air quality and equity goals.

This could be accomplished with two simple sentences of statutory text that would forever break the conflict between reducing fuel consumption, reducing the need to drive, and collecting needed revenue. One sentence would index the gas tax to inflation and fuel consumption, and another would tax electric vehicles as if they drove on gas through a Road User Charge adjusted for vehicle efficiency.

A Road User Charge that accounts for vehicle efficiency and inflation could easily be extended to electric vehicles by adjusting the flat fees the Oregon DMV is already collecting from EV drivers, forever stabilizing transportation revenue. Oregon did the same thing in the power sector years ago through a simple accounting mechanism, and it’s been working ever since.

How We Got Here

Oregon has been piloting a “Road User Charge” for a decade. The state’s effort has provided important lessons and insights. However, with 1,300 volunteer vehicles, the OReGO pilot only generated $842.77 in net revenue because it wrote checks to drivers of vehicles that get less than 20 MPG to refund them for money they spent on gas taxes in excess of what the flat cent-per-mile Road User Charge collects. Per the program’s final evaluation report:

“The only reason the program has a positive balance is because there are slightly more vehicles in the program that get more than 20 MPG, than there are vehicles that get less than 20 MPG.”

That was no accident, because they stopped letting gas guzzlers volunteer into the program. In other words, the program’s negligible net-revenue was entirely reliant on volunteers with more efficient vehicles enrolling into a pilot against their own economic self-interest. If drivers of vehicles that get less than 20 MPG had been allowed to continue to opt-in, the program would have lost money.

The amount of the refund checks increases with the amount of association pollution. If the aspiration of the program to replace the state’s gas tax is ever realized, it would no longer write physical checks that correspond to pollution, but the effect would be the same. This is the inherent deficiency in any flat Road User Charge.

But rather than fixing that deficiency by adjusting the charge to account for vehicle efficiency, as the gas tax does inherently, House Bill 2342 keeps the same flat fee, but only assesses that fee on vehicles that get more than 30 MPG. So it wouldn’t write checks to gas-guzzlers, but it still undermines the state’s climate, air quality, and equity goals, because it still penalizes vehicle efficiency that reduces pollution and reduces consumer expenditures on fuel.

Examples of Leadership Across the West Coast

California’s legislature is currently considering a bill that would move the state’s Road User Charge pilot from one that merely collects data, to one that collects revenue. As introduced, the California bill would have been revenue neutral relative to the gas tax, replicating the OreGo pilot.

NRDC and a diverse coalition of environmental, public health, bicycle, and environmental justice advocates expressed our concern that this policy would take money from people driving efficient Corollas and give it to people driving gas guzzling Cadillacs, as did the OreGo pilot.

Thankfully, Senator Scott Wiener, who is clean transportation champion, amended the bill to pilot a Road User Charge that’s adjusted for vehicle efficiency, thereby eliminating the inherent defect in a flat fee and setting an important precedent.

And in Washington state, the legislature is also directing its transportation commission to examine a Road User Charge that is adjusted:

“…so that vehicles of comparable efficiency pay the same rate regardless of their means or propulsion and examine options for indexing to stabilize revenue as vehicle fleets become more efficient over time.”

In other words, the other West Coast states have learned from Oregon’s missteps and are moving forward with a simple adjustment to ensure their programs are not in conflict with efforts to reduce pollution and reduce consumer spending through efficiency gains and reductions in vehicle-miles-travelled. Oregon should learn the same lesson.

Oregon’s own Commission-adopted Statewide Transportation Strategy recommended adjusting any Road User Charge to account for emissions (which accounting for efficiency does inherently).

Moving Forward

Instead of adopting a flat Road User Charge that singles out efficient vehicles, the state should reclaim its policy leadership in this space by implementing a comprehensive solution that addresses the real sources of transportation revenue shortfalls and that furthers the state’s broader goals.

NRDC would be happy to work with the legislature and Oregon Department of Transportation to implement this simple fix. In the meantime, Oregon should reject House Bill 2342, which will undermine Oregon’s climate, air quality, and equity goals without resolving the state’s long-term transportation funding challenges.

About the Authors

Max Baumhefner

Senior Attorney, Climate & Clean Energy Program

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